Rutland Transit Co. v. Chicago Tunnel Terminal Co., 11643.

• Decision Date: 03 May 1956
• Docket Number: No. 11643.,11643.
• Citation: 233 F.2d 655
• Parties: RUTLAND TRANSIT COMPANY, Plaintiff-Appellee, v. CHICAGO TUNNEL TERMINAL COMPANY and Chicago Tunnel Terminal Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

233 F.2d 655 (1956)

RUTLAND TRANSIT COMPANY, Plaintiff-Appellee, v. CHICAGO TUNNEL TERMINAL COMPANY and Chicago Tunnel Terminal Corporation, Defendants-Appellants.

No. 11643.

United States Court of Appeals Seventh Circuit.

May 3, 1956.

Edward H. Hatton, Albert E. Jenner, Jr., Thomas P. Sullivan, Chicago, Ill., for appellants. Johnston, Thompson, Raymond, Mayer & Jenner, Chicago, Ill., of counsel.

Irwin I. Zatz, Sidney R. Zatz, Walter N. Kaufman, Chicago, Ill., for appellee. Arvey, Hodes & Mantynband, Chicago, Ill., of counsel.

Before MAJOR, FINNEGAN and LINDLEY, Circuit Judges.

MAJOR, Circuit Judge.

Plaintiff filed a complaint on January 27, 1955, in the District Court, alleging that defendants were delinquent in the payment of certain obligations due under a lease arrangement previously entered into between plaintiff and defendants. On October 11, 1955, a default judgment was entered in favor of plaintiff and against defendants in the amount of $35,891.66. On October 31, 1955, defendants, by their attorneys, filed a motion to vacate such default judgment along with the findings of fact and conclusions of law entered in connection therewith. At the same time, leave was sought to file instanter an answer to plaintiff's complaint, together with a motion for summary judgment and affidavits in support thereof. On November 7, 1955, the lower court denied the motion to vacate and leave to file the answer and the motion for summary judgment. From this order of denial defendants have appealed.

As a basis for reversal of the action of the lower court the defendants present the following issues for determination: (1) whether the failure of plaintiff to give a notice as required by Rule 55(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A., render the default judgment a nullity, and (2) whether defendants established inadvertence and excusable neglect along with a meritorious defense sufficient to entitle them to relief under Rules 55(c) and 60(b) of the Federal Rules of Civil Procedure.

While it is seriously argued that the default judgment was entered in violation of Rule 55(b) (2), we are of the view that under the facts and circumstances as hereinafter set forth this argument must fail. Rule 55(b) (2) provides in part as follows:

"* * * If the party against whom judgment by default is sought has appeared in the action, he (or, if appearing by representative, his representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application. * * *"

It is to be noted that this provision requires that a written notice shall be served if a party has appeared in the action. As will be subsequently shown, it is doubtful whether the defendants made such an appearance as would bring them within the purview of this rule. We seriously doubt that such is the case but, in any event, we believe that the better view is that under facts and circumstances herein present the notice provision of this rule is to be considered as a procedural requirement rather than a substantive one. See United States v. Borchers, 2 Cir., 163 F.2d 347, 349, and United States ex rel. Knupfer v. Watkins, 2 Cir., 159 F.2d 675, 677. We think the reasoning of these cases is particularly applicable here for the sound reason that the defendants, almost from the time of the inception of this litigation until the day of the entry of the default judgment, indicated that they had no defense to the action, and at least one failure to enter a default judgment after the giving of notice was occasioned by defendants' assurance that they would interpose no defense.

Rule 55(c) of the Federal Rules of Civil Procedure provides in substance that a default judgment may be set aside in accordance with Rule 60(b), the pertinent provisions of which are as follows:

"* * * On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; * * (6) any other reason justifying relief from the operation of the judgment."

In addition to the above provisions the courts have held that anyone seeking to set aside a default judgment due to excusable neglect or inadvertence must also show that they have a meritorious defense which can be interposed. See Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244. This court has further held that a motion to vacate a judgment under 60(b) is addressed to the sound legal discretion of the court and an abuse of such discretion must be shown before denial of such motion will be overturned on appeal. See Jones v. Jones, 7 Cir., 217 F.2d 239, 241.

We are of the view that a recitation of the incidents leading up to the entry of default judgment will conclusively show that the defendants have not brought themselves within the provisions of Rule 60(b) and that the trial court exercised sound discretion in denying their motion.

As stated at the outset, plaintiff filed its complaint in the lower court on January 27, 1955. This complaint alleged that the defendants had defaulted in the terms of a lease agreement entered into between the parties and asked for a money judgment. A summons was served on the defendants on February 1, 1955. On February 8, 1955, the case was reached in the court of Judge John P. Barnes, on the call of civil cases. Some person who was unknown at that time, without announcing his name or any firm name, stated that the time for filing a responsive plea had not been reached and the court directed that the case would be placed on the passed case calendar.

Shortly thereafter, a Mr. John C. Richert, an attorney representing defendants, telephoned Mr. Sidney R. Zatz, one of plaintiff's attorneys, and requested an extension of time within which to file a pleading for defendants, which pleading was due February 21, 1955. At that time Mr. Richert admitted to Mr. Zatz that there was no defense to the action which had been filed by Zatz on behalf of plaintiff. On February 16, 1955, Mr. Richert wrote one William Henning Rubin who was the executive officer of the defendants, telling him of the action and the due date of any pleading and that there was no defense to the action. He further stated that Mr. Zatz would not agree to an extension of time and that Zatz intended to proceed to secure a summary judgment as soon as possible. This letter further informed Mr. Rubin that unless something was done a default judgment could not be prevented.

Mr. Zatz stated to Mr. Richert that the plaintiff would perhaps agree to a 30-day extension...